Rebalancing your portfolio

Why allocations drift on their own

If a SIP contribution buys the same ETF every month, the portfolio might seem fixed. But once someone holds more than one fund — say a US-focused fund and a global one — their relative weights shift as each grows at a different pace. A holding that started at 50% of the portfolio can quietly become 65% after a strong run, without a single new decision being made.

Rebalancing means bringing those weights back toward an original target, either by directing new contributions toward the smaller holding or, less often, by selling some of the larger one.

How often people typically check

There's no single required schedule. Many long-term investors review allocations once or twice a year rather than reacting to every market move. Checking too often can lead to unnecessary trading and fees; checking too rarely can let a portfolio drift far from its original intent.

• Calendar-based — a fixed check-in, like every January, regardless of what markets did.
• Threshold-based — rebalancing only when a holding drifts beyond a set percentage from its target.

The simplest approach for SIP investors

For someone contributing monthly, the least disruptive way to rebalance is often to direct new money toward whichever holding has fallen below its target weight, rather than selling anything. This keeps the portfolio moving back toward balance gradually, without triggering a sale.

If the portfolio is a single fund

Someone holding just one broad halal ETF has nothing to rebalance between funds — the fund's own managers handle rebalancing its internal holdings. In that case, this chapter mostly serves as background for later, if a second fund is ever added.

What to remember

Rebalancing brings a multi-fund portfolio's weights back to their original targets, since funds grow at different rates over time. Directing new contributions toward the smaller holding is usually the simplest approach, and a once- or twice-yearly check is a common rhythm — not a rule.